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Johannesburg - Expect better performance for emerging equity markets going forward, according to Maarten Ackerman, portfolio manager at wealth manager Citadel.
"Emerging equity markets lagged their developed market peers over the past year despite company earnings keeping pace. We, therefore, expect better performance for these markets going forward." he said on Monday.
"Within the emerging market space, South African equities seem overvalued and some sectors are rather expensive. Citadel currently underweights South African equities and prefer sectors offering better value, such as resources."
Unfortunately, it seems the SA economy is struggling to find first gear and the reverse light comes on from time to time, he pointed out.
The growth environment deteriorated rapidly on the back of the longest industrial strike in history. Growth in the first quarter declined by 0.6%, largely on the back of an almost 25% decline in mining and a more than 4% decline in manufacturing.
"The big question now is whether SA is likely to see another quarter of negative growth, which will technically mean that the country is in recession," said Ackerman.
"However, recent mining, manufacturing and retail data, coupled with an end to the labour strikes, do suggest a potential rebound in second quarter growth."
Many global equity markets reached new highs over the past few months, while most risk indicators declined to historical lows, according to Ackerman.
However, current market levels are mostly in line with underlying fundamentals and are keeping pace with increases in company earnings, dividends and cash flow.
"Valuations therefore, suggest that most markets are trading at or below their long-term fair value," he said.
Slowly shifting to second gear
The global economy is slowly preparing to shift to second gear as stronger economic momentum, particularly in the US and UK, is setting the scene for the first interest rate hike in the developed world in many years, according to Ackerman.
Global growth momentum picked up over the past few months after a pause during the first quarter of 2014.
"Most global leading indicators suggest that global growth should accelerate towards the end of this year. A rebound in global trade volumes further supported economic activity," said Ackerman.
"Against this background, commodities performed rather mixed during the first half of this year."
- Fin24
"Emerging equity markets lagged their developed market peers over the past year despite company earnings keeping pace. We, therefore, expect better performance for these markets going forward." he said on Monday.
"Within the emerging market space, South African equities seem overvalued and some sectors are rather expensive. Citadel currently underweights South African equities and prefer sectors offering better value, such as resources."
Unfortunately, it seems the SA economy is struggling to find first gear and the reverse light comes on from time to time, he pointed out.
The growth environment deteriorated rapidly on the back of the longest industrial strike in history. Growth in the first quarter declined by 0.6%, largely on the back of an almost 25% decline in mining and a more than 4% decline in manufacturing.
"The big question now is whether SA is likely to see another quarter of negative growth, which will technically mean that the country is in recession," said Ackerman.
"However, recent mining, manufacturing and retail data, coupled with an end to the labour strikes, do suggest a potential rebound in second quarter growth."
Many global equity markets reached new highs over the past few months, while most risk indicators declined to historical lows, according to Ackerman.
However, current market levels are mostly in line with underlying fundamentals and are keeping pace with increases in company earnings, dividends and cash flow.
"Valuations therefore, suggest that most markets are trading at or below their long-term fair value," he said.
Slowly shifting to second gear
The global economy is slowly preparing to shift to second gear as stronger economic momentum, particularly in the US and UK, is setting the scene for the first interest rate hike in the developed world in many years, according to Ackerman.
Global growth momentum picked up over the past few months after a pause during the first quarter of 2014.
"Most global leading indicators suggest that global growth should accelerate towards the end of this year. A rebound in global trade volumes further supported economic activity," said Ackerman.
"Against this background, commodities performed rather mixed during the first half of this year."
- Fin24
